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How do you spend your free time? Hanging out with your friends or watching videos on TikTok.
Is there anyone who doesn’t know TikTok? Of course nobody!!!
Tik Tok is currently the talk of the day. It is a video-sharing app that allows its users to create and share 15 seconds-long videos. After its launch by ByteDance, the mobile application spread like wildfire, attracting over 500 million users hardly three years later.
The attention that Tik Tok has brought to its owners is amazing. Yes, ByteDance was recently recognized as the most valuable startup in the world. Undoubtedly, this was due to the impressive success of the Tik Tok application.
Many are still wondering how the Tik Tok company generates money from the application. This is what we want to feature today. In any case, the app was bought by ByteDance for about $1 billion. Thus, it is quite natural for us to want to know how they are going to generate money out of it. That is what we are going to talk about in this article; the Tik Tok Business Model. You also will learn a lot more about this application people just cannot stop talking about.
Before we even go deeper, let’s have a glimpse of Tik Tok operation:
ByteDance a while ago closed funding deals with SoftBank and some other powerful investors. In total, the funding was a staggering $3 billion. This ended up making the ByteDance company value to hit $75 billion. CB Insights considers this company the current-times most successful Unicorn.
Tik Tok presents itself as a destination where creativity is nurtured and celebrated. It is a destination where the world’s creativity, all the treasured moments and knowledge thrives. It makes all this just with a mobile phone application with no complications with its use. Everyone who likes can be a creator on Tik Tok.
They bring a platform where you can transform your ideas and passions into interesting videos, just on a few clicks. It is a place for entertainment as well. And we expect it to be the next application to command the world of social media marketing.
Indeed it is quite natural for you to wonder why on earth such a simple tool of video creation and sharing could shake the world of social media. You might wonder why such a seemingly ordinary mobile application could attract the attention of established and successful names like Facebook.
And that is the case just as it is. Tik Tok caught a better section of the population into talking about it.
And what about the company behind this application?
ByteDance is the company behind Tik Tok. It is based in China and headed by Yiming Zhang. He is a lifelong entrepreneur who founded a number of ventures before climaxing at ByteDance. He is also the brain behind the real estate search portal in China. While at college, Yiming Zhang is reported to have been troubleshooting computer issues to earn some extra cash. So technology is certainly in his blood.
Yiming Zhang ever worked with Kuxun as the Director for Technology, managing over 40 engineers in this travel search engine in China. This business was later on bought by TripAdvisor. From a trusted source in Forbes, just this year January, Yiming Zhang had a net worth of $6.8 billion. Much of this dramatic rise is credited to the success of ByteDance.
And so how does the application generate money?
As you will agree with me, how Tik Tok generate money is still quite unclear. It is a new application and its monetization strategy is still rather complicated at its best. This, however, does not mean that Tik Tok is not generating money at all. It doesn’t make sense at all considering how much ByteDance paid to have ownership of the application.
CrunchBase reports that the application generates up to a million dollars every year. While is it true that Tik Tok is currently focusing on popularity and growth, monetizing it influences its long-term success. As at now, Tik Tok gets money through the in-app purchases mostly in terms of coins. This starts from 100 for $0.99 reaching 10,000 for $99.99.
By this, users who mostly consume content could issue coins to the creators who have churned out great content that amuse them, just an appreciation or compensation framework. They offer them coins in the exchange of digitals gifts. Reports by Sensor Tower have it that users globally spend up to $3.5 million a month for such in-app purchases. Meanwhile, it is not clear how the platform itself earns from this. All we know is that they could deduct some percentage if they deem appropriate.
As Tik Tok is still at its infancy, they have not revealed much about their future app monetization strategy. We, however, have a few strategies that we expect to work particularly well for Tik Tok and help them generate income for the company. These are the possible ways:
Advertising avenues that generate targeted ads. This, in turn, generates revenues. YouTube earn from this strategy and its working for them. Tik Tok could implement the same and we know it is going to work for them as well.
Content creators can monetize their contents and earn from it. In the long run, the platform can deduct some percentage out of it. This is the one critical step for the future penetration of the app among its users. It will be a win-win strategy where both the owner and the users will have something to take home.
The other way of generating money is by the subscription model for the original. The platform could assemble the best of the short video contents for this.
Note that these strategies have not been implemented by Tik Tok yet, but they could be viable strategies for them to monetize the now globally popular social media application.
The growth of Tik Tok has been quite impressive that Facebook recognized it. By 2018, hardly 2 years after its official launch, the application already had a whopping 500 million users. The rise has led Facebook into thinking of developing a similar application, Lasso to counter the massive growth and penetration.
The current penetration of Tik Tok makes it quite natural for us to think that it is unstoppable. Even if Facebook will develop a similar application and take it off the ground, it will not challenge Tik Tok. Of course, the application will be taken in some quotas but will not become an equal replacement for Tik Tok.
Tik Tok is hugely popular among the youth. They are the type that churns out creative short videos and shares among their peers. What we have noted is that Tik Tok is focusing on winning more youth into using the application. They seem to target their ads on youth in different channels on the web. They do so on YouTube, Facebook, and even Google.
As you might have noted, Tik Tok is more determined on penetration and growth than on making money out of the application, as at now. This is quite logical for them. In a world where social media is dominated by a few players, penetrating though it could be a painstaking experience.
Thus, they want to establish their place at the top before they face any substantial attack from the respected influencers. The fact that Facebook has come out clearly to challenge them certainly has spiced up their dedication to commanding a bigger section of the population before things get out of hand.
What keeps Tik Tok ahead of the rest in the niche is their coveted research lab which is duped AI Lab. They claim to be experts in a number of current developments in technology. They seem to get along well with Natural Language Processing (NLP), Machine Learning and even Computer Vision.
Bloomberg reports that ByteDance generated a revenue of $2.5 billion in 2017 alone. As a whole, CB Insights has it that the company is valued at $75 billion. This is above what Uber is valued at. When Tik Tok will eventually implement a solid money generation strategy, we expect it to grow even bigger. It has great potential considering their user penetration.
Building an app is one thing, sustaining it is quite another. We know of powerful names like Facebook which climbed themselves to the top and established themselves a home there, never to be shaken. We are also aware of the one-time powerful names such as Snapchat that we no longer talk about.
So the point is, Tik Tok indeed has gotten themselves at the top of the social media. If there is ever the most critical stage for them, it got to be now. They need to have a strategy to ensure a fulfilling interaction among their users and for them to generate money. This will ensure a long-term existence in the world of social media. Yes, as at now, it is undoubtedly the most celebrated global application created in China.